From: John Murray [djtm72@yahoo.com]
Sent: Friday, January 16, 2004 5:58 PM
To: rule-comments@sec.gov
Subject: S7-27-03:
To Whom It May Concern:
I am a retiree with the majority of my lifetime savings in my 401K Plan. Your
proposed rule will likely introduce an extra one day delay in my ability to move
my savings out of equities and into a more conservative investment (e.g., a Money
Market Fund) should I choose to do so in the event of a significant market downturn.
This would place me and millions of other 401K Plan participants at a significant
disadvantage compared to other investors. For example, on Friday, October 16,
1987, the Dow Jones Industrial Average fell 108 points (4.7%). That Friday many
thousands of investors determined that the time was right to sell their equity
positions. By doing so, they avoided the Monday, October 19, 1987 crash in which
the Dow dropped another 508 points (22.6%).
Please reconsider your proposed hard cut-off rule as it pertains to 401K Plans.
I don't know if I will be fortunate or wise enough to avoid the next crash by
moving my life savings to more conservative positions if the market drops
significantly as it did on the Friday before the 1987 crash, but I and millions
of other 401K Plan participants deserve the same opportunity other market
participants have to react quickly to major financial market impacting world
events. Please don't strip us of our ability to protect our life savings.
My 401K Plan is managed by Fidelity Investments. The mechanized and manual
controls in place will not allow "late trading." Any transfer request submitted
after 4:00 PM EST becomes effective at 4:00 PM the next New York Stock Exchange
trading day. I suspect that similar controls are in place for all major 401K
Plans and for the vast majority of small 401K Plans.
I propose this exception to your hard cutoff rule as it pertains to 401K Plans.
Prior to the effective date of the rule, allow 401K Plans to be exempt from the
rule provided they satisfy stringent certification requirements established by
the SEC. To receive exemption from the hard cutoff rule and be permitted to
process and send transactions to mutual funds after 4:00PM EST, a 401K Plan
would be required to provide the SEC with a clear and convincing description
of its mechanized and manual "time stamp" controls to prevent "late trading."
This certification to the SEC would be from a 401K Plan Administrator's highest
level of management authority and would require sign-off and concurrence from
a reputable External Auditing Firm. The auditing firm would attest to the fact
that they have audited the control process and found it to be adequate. If the
SEC chooses to establish minimum "time stamp" control pro cess requirements,
the certification would also specifically address and attest to the fact that
such minimum requirements have been satisfied. Ongoing "time stamp" control
processes would be subject at any time to SEC audit. The certification, including
external audit review, would be repeated every 12 months in order for a 401K Plan
to maintain exemption from the hard cutoff rule.
Sincerely,
John Murray
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